Massive Job Gains

Mortgage rates continued to be heavily influenced by movements in oil prices this week. In addition, stronger than expected labor market data was great news for the economy but unfavorable for mortgage markets. As a result, rates ended the week higher. 

Wage growth remained moderate, with average hourly earnings increasing 0.3% for the month, in line with forecasts. On an annual basis, wages rose 3.4%, down from 3.6% the previous month and marking the slowest pace of growth since May 2021. This is below the current inflation rate. The unemployment rate was unchanged at 4.3%, as expected.

The latest JOLTS (job openings and labor turnover rates) report, covering the month of April, was unexpectedly strong. At the end of December, there were 7.6 million job openings, far above the consensus forecast of 6.9 million and the most since May 2024. More openings suggest that companies face greater pressure to raise wages to hire enough workers, signaling strength in the labor market. This makes Fed officials more reluctant to loosen monetary policy by lowering the federal funds rate.

Two other significant economic reports from the Institute of Supply Management also exceeded expectations. The ISM national services sector index rose to 54.5, while the ISM national manufacturing sector index climbed to 54.0, the highest level since May 2022. Readings above 50 indicate an expansion in the sectors. While tariff policies have been in flux since the Supreme Court decision in February, the higher tariffs on foreign goods put in place last year may be helping domestic manufacturing companies close the performance gap with service firms over the last few years.

Looking ahead, attention will remain fixed on the conflict in the Middle East. Investors also will monitor comments from Fed officials about future monetary policy. For economic data, Existing Home Sales will come out on Tuesday. The Consumer Price Index (CPI), a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services, will be released on Wednesday. The Producer Price Index (PPI), another monthly inflation indicator, will come out on Thursday.